WHEN TWO BECOME ONE: A POSITIVE DUE DILIGENCE EXPERIENCE

Remember how it felt when you signed up for your first mortgage? That mix of excitement and clarity, knowing exactly what you were committing to. Due diligence can feel the same way, an essential step that gives both sides confidence and a clear path forward.

With the right preparation, clear expectations and an open mindset, firms on both sides of a potential acquisition can minimise anxiety. It can even be a constructive and positive experience for all involved.

We are often asked to help clients with the due diligence process and have seen the good, the bad and the ugly! Getting it right gives the acquiring firm confidence in what they are taking on. For the firm under review, it is an opportunity to demonstrate your strengths, culture and long-term potential.

When managed well, the process becomes less of a tick-box exercise and more of a meaningful conversation about how two business might come together successfully.

Preparation is key

Firms that cope the best with due diligence are those that prepare early.

Be realistic about timeframes. Every acquisition is different, but an ideal due diligence window is typically no more than three to six months. Any longer and momentum starts to slip. People lose interest, information becomes outdated and the tone of the process can shift from constructive to frustrating.

Before you begin due diligence, the acquiring firm should set out a clear and agreed list of documents and data it expects to review. This might include governance records, compliance monitoring plans, SYSC-related policies, SM&CR documentation, client files, training logs and management information. Agreeing the scope upfront keeps both sides aligned and avoids surprises.

As a seller, it saves a tremendous amount of stress if you have these documents ready in advance, or at least know where they are and how quickly they can be produced. Smaller firms in particular might find this challenging, as senior leaders are often stretched thin, juggling client work, operations and people management. If you need more time to gather information, it is always best to be honest about capacity constraints than risk delays.

Communication builds trust

Keeping the lines of communication open is the single most powerful way to ensure due diligence progresses smoothly.

The acquiring firm will inevitably come across areas where clarification is needed during their review. Sometimes this is as simple as understanding why a document is missing, why information looks inconsistent or something has been recorded in a particular way.

Don’t let these conversations feel accusatory or defensive. Instead, approach them collaboratively. Asking why something is difficult to produce often uncovers useful context. For example, a firm may not have the required MI because its systems do not support it, or processes are being updated to meeting new FCA expectations. When dialogue stays positive, both sides learn from the experience and can move forward constructively.

Be mindful that your communication style also forms part of the due diligence assessment of culture. This is something the FCA makes clear under the Principles for Business, the Senior Managers and Certification Regime and Consumer Duty. How a firm responds to pressure, challenge or scrutiny can reveal a great deal.

Honesty is the best policy

If you know an issue is likely to emerge during due diligence, it is far better to mention it than to let it surface during the review. Problems do not disappear when they are avoided.

Transparency builds trust, so if you have a gap in your record keeping, inconsistent client files, weaknesses in your MI or an old compliance breach, say so. Attempting to hide issues, or worse, altering data during the process will almost certainly have a negative impact on the acquiring firm’s perception of you.

Due diligence is designed to uncover risks, not punish them. Most acquiring firms are realistic and they don’t expect perfection. In fact, a firm that looks too clean can raise concerns. It matters far more that you understand your weaknesses, can explain them honestly and have evidence of improvement.

Culture and conduct

A firm’s culture and ethical conduct play a significant role in shaping the outcome of due diligence.

How you behave during the review, how responsive you are, cooperation from the leadership team and how well you treat both the acquiring firm and any third-party reviewer can build confidence just as much as good data can.

A respectful, proactive and organised approach creates a positive impression and signals that a firm will be easy to integrate. Conversely, unresponsiveness, disorganisation or defensiveness can give the impression there are deeper operational or cultural issues.

The value of support

There are real benefits to delegating certain aspects of the due diligence process to independent specialists, such as a compliance consultancy like B-Compliant.

For acquiring firms, an external reviewer provides objectivity and a willingness to report ‘warts and all.’ It is our job to highlight risks clearly and accurately.

We can be equally valuable for firms being acquired, particularly when internal capacity is limited. We can help gather, organise and upload documents, ensuring the data is complete and presented professionally. This often reduces the stress for senior management and keeps the process moving apace.

When both parties are organised, cooperative and communicative, due diligence will run efficiently. Remember, no one expects you to be flawless. Identifying and explaining imperfections is far more reassuring than presenting a picture that is too good to be true.

If you would like help preparing for a due diligence review or support for an acquisition, don’t hesitate to contact us on (0161) 521 8641 or email: info@b-compliant.co.uk